Stocks finished a hair lower today after the House of Representatives postponed the vote on TrumpCare.
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The S&P 500 declined 0.1% to 2,345.96 today, while the Dow Jones Industrial Average dipped 4.72 points to 20,656.58. The Nasdaq Composite finished off 0.1% at 5,817.69.
Morgan Stanley’s Michael Zezas and team and team the odds of growth-boosting tax cuts and fiscal spending getting passed are dropping:
Republicans are attempting to pass the American Health Care Act (AHCA) and tax reform through budget reconciliation in order to sidestep a Democratic filibuster. Because they have already approved the FY17 budget resolution with reconciliation instructions that are intended for repealing ACA, it is unlikely that they pass tax reform until AHCA is either approved or abandoned. Hence, delays in the AHCA process risk delays in tax reform, the timing of which we’ve already pushed out to Q4 based on its own complexity. Further, AHCA’s difficult path to passage despite a Republican majority is a function of heretofore unmet demands by conservatives. This signals a bolder stance for fiscal hawks, which may limit the potential for tax reform to meet market-friendly goals…
Hence, we affirm our view that the odds of market-friendly tax & fiscal outcomes are eclipsed by the sum of less friendly ones. Further, indications that the Republicans will ‘fish’ rather than ‘cut bait’ could strengthen this view.
Guild Investment Management’s Monty Guild and team argue that “interest rates remain the big story for your portfolio.” They explain why:
The biggest-picture story for your portfolio remains the end of the decades-long bond rally and the arrival of a multi-year uptrend in interest rates. This leads to two conclusions: first, that bonds will prove to be uncompetitive with stocks; and second, that income stocks will be uncompetitive with stocks that can grow and raise their dividends. Investors who must own bonds should own very short maturities. Interest rates will rise, but we expect the Fed to continue to keep them close to the rate of core inflation. Therefore, we do not see a rate-driven monetary tightening and recession as an imminent risk, and we continue to favor stocks. We
like technology growth stocks which have high earnings visibility into the future; some regional bank stocks which have come down in price in the last few days; financial services companies in the credit card and insurance areas; major banks; and materials stocks that will be benefited by the administrations desire to create better trade deals for the U.S. and to discourage dumping by foreign producers.
If they ever get around to that.